Let's Talk Money

Things that don't belong anywhere else. (Check first).

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HES
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Re: Let's Talk Money

Postby HES » Mon May 08, 2017 1:34 pm UTC

Zohar wrote:
sardia wrote:You didn't discuss the cases where you have time to spare but no money. Can you think of reasons why you would spend money instead of sweat equity there?

How often does this happen? Poor people quite often have to work quite a lot to stretch their money.


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Re: Let's Talk Money

Postby Zohar » Mon May 08, 2017 1:42 pm UTC

Students presumably don't have that much time on their hands. And part-time workers, again, probably still need to spend a lot of time just to use their money cleverly.
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Re: Let's Talk Money

Postby sardia » Mon May 08, 2017 2:01 pm UTC

Zohar wrote:Students presumably don't have that much time on their hands. And part-time workers, again, probably still need to spend a lot of time just to use their money cleverly.

The only example where sweat equity isn't better when you have no money is when the fix isn't very good. Like constantly repairing a broken down lawn mower instead of getting a new one to the detriment of your job. I dunno, I keep thinking of inefficient repairs, should be a scenario where it would be better to just have it professionally done.

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Re: Let's Talk Money

Postby SecondTalon » Mon May 08, 2017 5:06 pm UTC

Time is money. If you have time, learning a skill to repair something eats in to your time spent trying to get money.

There's also the problem of equipment. I would more than gladly learn to build my own furniture if I could just... have... a woodworking shop with proper tools. As is, I've got a couple of saws, drills, bits, blades but no planes, routers or vices. At least not enough vices of necessary strength. I also don't have a few hundred hours to learn it.

But the equipment is the point I'm getting at - lots of repairs and constructions can be done with a limited selection of tools, true, but you're still looking at a few hundred bucks in hardware. And many 30 minute jobs with generic tools are 5 minute jobs using a tool explicitly for that one job.

And, like I said, time is money. Learning how to do task X which comes up once every five or six years - or longer - will take you a few hundred hours with a few tens of hours ever year to keep your skill up. For something you do once every 5-6 years.

If you charge yourself $10 an hour, that's a few thousand bucks, easily, for two decades of repair. Or you pay a guy $100 to do it for you and she'll out $400 for the same 20 year span.

I mean, I get the frustration with people's inability to do dirt simple repairs (unscrew two screws, remove the plate, remove the blockage, replace plate and screws, done) but for a lot of things? Just pay the guy. Society rewards specialization for a reason - it's just more efficient for one guy to master X than for 100 people to get technically correct on A, B, C.... X, Y, Z
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Re: Let's Talk Money

Postby ucim » Mon May 08, 2017 5:35 pm UTC

But there's many a time where the pro doesn't do anywhere near as good a job as the DIY. Some of these people, really, I wonder where they learned their trade, or whether they care whether the job is done right (as long as the customer doesn't see). This is rampant in the home remodeling industry. I'd rather do it myself than put up with some of those bozos.

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Re: Let's Talk Money

Postby Zamfir » Mon May 08, 2017 8:02 pm UTC

You didn't discuss the cases where you have time to spare but no money. Can you think of reasons why you would spend money instead of sweat equity there?

Sure, there's plenty of situations where people do stuff themselves to save money, or for whatever other reason. They don't need me to tell them what to do.

My comment was solely about people who are on the fence. People who are perhaps willing to spend the money to save the time and hassle, but feel that it's in some sense 'better' to do the work themselves. I thought that your remark about shame referred to such situations?

As an aside, why refer to this as sweat equity? There are no other owners or stakeholders involved.

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Re: Let's Talk Money

Postby sardia » Mon May 08, 2017 8:07 pm UTC

Zamfir wrote:
You didn't discuss the cases where you have time to spare but no money. Can you think of reasons why you would spend money instead of sweat equity there?

Sure, there's plenty of situations where people do stuff themselves to save money, or for whatever other reason. They don't need me to tell them what to do.

My comment was solely about people who are on the fence. People who are perhaps willing to spend the money to save the time and hassle, but feel that it's in some sense 'better' to do the work themselves. I thought that your remark about shame referred to such situations?

As an aside, why refer to this as sweat equity? There are no other owners or stakeholders involved.

Fair enough. I was always taught that my time wasn't valuable as your family's money. Force of habit to do it yourself, alongside bad experiences like Ucim's anecdote. Usually I'll analyze the cost benefit, but that doesn't always happen.

It's called equity because it most often applies to home property. Ex you labor on an upgraded kitchen and it raises the price of your home when you sell it. Hence sweat equity. Equity is a common term for home values.

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Re: Let's Talk Money

Postby doogly » Tue May 09, 2017 1:10 am UTC

Your time is worth what someone will pay for it.
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Re: Let's Talk Money

Postby ucim » Tue May 09, 2017 1:40 am UTC

doogly wrote:Your time is worth what someone will pay for it.
...minus what it costs you to market yourself. Minus the cost of any equipment you need (only) to make that use of your time.

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Re: Let's Talk Money

Postby doogly » Tue May 09, 2017 12:19 pm UTC

Fine, your time is gross worth what someone will pay for it.
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Re: Let's Talk Money

Postby SecondTalon » Tue May 09, 2017 12:26 pm UTC

Your time may be gross, by my time is....

Yeah, it's pretty gross too
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Re: Let's Talk Money

Postby doogly » Tue May 09, 2017 1:29 pm UTC

seriously how does time get sticky
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Re: Let's Talk Money

Postby Zohar » Tue May 09, 2017 6:27 pm UTC

In ST's case the answer is goats.
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Re: Let's Talk Money

Postby SecondTalon » Tue May 09, 2017 6:44 pm UTC

If your significant otter doesn't look at you like my goat looks at cardboard, get a new SO.

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Re: Let's Talk Money

Postby Isaac Hill » Tue May 09, 2017 10:31 pm UTC

I spoke to a financial advisor at my bank, including my moral qualms about investing in companies I know nothing about, and he came up with 3 options:

1) Calvert, a company that specializes in socially responsible investing. The main downside is the 1.3% annual fee.

2) A policy that guarantees a 3% rate of return over 6 years. Basically, I'm loaning my money to a company at 3% interest. The company will try to invest it at a better rate of return and pocket the difference. There's no fees involves, but I'm guessing the company would have no problem investing in morally dubious things.

3) Something that's not invested in the market, but is linked to an index. There's a set withdrawl date X years after I make the purchase. At the end, I have to cash out, even if the index is in a slump; I can't just wait it out for another couple months. On the other hand, the index could be doing exceptionally well that day, and I'd make out. Plus, this is the only one that's FDIC insured.

He mentioned municipal bonds, but not in much detail, as I'd buy them directly instead of through the bank.
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Re: Let's Talk Money

Postby ucim » Tue May 09, 2017 10:56 pm UTC

Isaac Hill wrote:I spoke to a financial advisor at my bank, including my moral qualms about investing in companies I know nothing about, and he came up with 3 options:
How about investing in companies you do know something about? You would need to pick and research them, but there are (almost certainly) many resources to help you do this. Of course, no company is completely morally pure; you'd have to figure out what moral issues you have, how companies intersect with them, and your tolerance level for moral turpitude averted sainthood. Other options include real estate and municipal bonds.

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Re: Let's Talk Money

Postby KnightExemplar » Tue May 09, 2017 11:24 pm UTC

Isaac Hill wrote:He mentioned municipal bonds, but not in much detail, as I'd buy them directly instead of through the bank.


Municipals are harder than most people think.

Its rare that you can participate in a direct auction. I've heard people do so, but that's not how it will work from most brokerages. Most municipal bonds are sold to big-banks and then divied out to "smaller" investors who can "only" afford $10,000 at a time. As such, expect markups in the ~1% region from most brokerages, and a bid-ask spread of as high as 5% if you plan on actually selling those things down the road.

Basically, these "fees" are never talked about. Its implicit when buying a municipal bond. Some bonds may take literally months before they're bought or sold, so the brokerages who provide inventory really do deserve some degree of compensation for the risk that they take. However, a bit of research on CUSIPs and the previous prices of the bonds can go a long way. (Try to stick to popular bonds which have lots of activity: if someone else bought the bond in the past week, you can be more confident that the price is fair)

However, there are many benefits. You can buy local or at the state level. Many (not all... but many) are Federal-tax free, and if you buy Municipals from your local state, they're often State-tax free. However, the prices on the tax-free bonds are bad... there are taxed bonds which are usually a better deal if you're not paying the top tier 39.6% tax rate.

Of course, run the math with your specific tax-bracket, maybe the tax-free bonds are better. But don't discount taxed municipals. If you're getting 30% better coupon on taxed municipals but are only in the 25% tax bracket, then you should go taxed. Again, most of the tax-free stuff is for the highest 39.6% tax tier.

--------

It always feels good though to invest in something local. Like there's a road that was recently built in my area, and I considered buying bonds in it. (I know the CUSIP and everything, but I decided to put my money elsewhere, into a Chicago Hospital bond for much higher profits). Without bondholders, those roads or hospitals would never be built... so you do good for your community and everything.

Alternatively, you can buy a mutual fund that focuses on municipal bonds. This adds diversity and simplicity, but costs a %-based fee each year. A good US Federal treasury-bond fund (like TLT) should have fees below 10 BPS (BPS == basis point. A percent-of-a-percent. 10BPS == 0.10%). Municipal bond funds are usually 20-BPS to 150BPS, depending on what you get.
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Re: Let's Talk Money

Postby sardia » Wed May 10, 2017 2:08 pm UTC

Isaac Hill wrote:I spoke to a financial advisor at my bank, including my moral qualms about investing in companies I know nothing about, and he came up with 3 options:

1) Calvert, a company that specializes in socially responsible investing. The main downside is the 1.3% annual fee.

2) A policy that guarantees a 3% rate of return over 6 years. Basically, I'm loaning my money to a company at 3% interest. The company will try to invest it at a better rate of return and pocket the difference. There's no fees involves, but I'm guessing the company would have no problem investing in morally dubious things.

3) Something that's not invested in the market, but is linked to an index. There's a set withdrawl date X years after I make the purchase. At the end, I have to cash out, even if the index is in a slump; I can't just wait it out for another couple months. On the other hand, the index could be doing exceptionally well that day, and I'd make out. Plus, this is the only one that's FDIC insured.

He mentioned municipal bonds, but not in much detail, as I'd buy them directly instead of through the bank.

Alternative option, invest in the standard low fee sp500 index fund, and then tithe your slightly​ dirty money to the appropriate cause, either after you retire or after long term capital gains tax has kicked in. Like Ke mentioned, bonds aren't something to invest lightly in, and the fees are horrendous.


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